The yuan hovered at a 2-month high against an easing dollar on Friday, despite disappointing data that showed Chinese factory activity growth slowed more than expected in April.
The currency looked set for its fourth straight weekly gain, the longest such winning streak since September.
Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.4672 per dollar, 43 pips firmer than the previous fix of 6.4715 and the strongest since March 3.
In the spot market, onshore yuan opened at 6.4690 per dollar and was changing hands at 6.4685 at midday, 35 pips firmer than the previous late session close.
If the yuan finishes the late night session at the midday level, it would have posted its fourth weekly gain in a row and the first monthly rise in three.
Traders said trading was tepid before the long Labor Day holiday, with many market participants already away for the vacation, while most investors refrained from holding huge positions for the five-day break to avoid volatility in global markets.
China's financial markets will be closed from Saturday, and trading will resume on May 6.
Onshore yuan swung in a tight range of about 60 pips, and volume shrunk to $12.58 billion at midday, down from a normal half-day volume of about $15 billion.
Several traders said the yuan was benefiting from a weaker dollar, which skidded toward a fourth straight weekly decline against a basket of major peers, as the Federal Reserve stuck to its message of ultra-low interest rates for longer.
But the slight gain in the yuan on Friday morning was capped by weaker-than-expected April manufacturing data.
China's factory activity expanded at a slower pace and missed forecasts as supply bottlenecks and rising costs weighed on production and overseas demand lost momentum.
Separately, signs of tension in the onshore interbank market also lent support for the yuan, with several key money rates climbing to more than two-month highs due to month-end higher cash demand.
The volume-weighted average rate of the benchmark overnight repo traded in the interbank market hit 2.2909% on Friday morning, the highest level since Feb. 18, while the weighted average of seven-day tenor also rising to the loftiest level since Feb. 9.
By midday, the global dollar index rose to 90.647 from the previous close of 90.62, while the offshore yuan was trading at 6.464 per dollar.
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